Loan Ranger: Consider all avenues before buying

If you have picked up a newspaper or turned on the television this past week, you can’t help but see headlines pointing out the current credit crisis or credit freeze that is going on.
Stock markets around the world have seen volatility in the last few weeks they haven’t seen in years. In a lot of these headlines, one of the main focuses is how credit relates specifically to the housing sector.
With the real estate market being a big part of the Emerald Coast economy, some are asking how all this credit crisis talk affects us here on the Emerald Coast.
For starters, how many times have you heard, “You need a minimum of 10 to 15 percent saved up for a down payment to qualify for a loan”? That is not entirely true and it really depends on what type of lender you are speaking with.
Or, “it is tough to get a home loan if you don’t have perfect credit scores.” Once again, who are you asking to loan you money? Is it a bank? A mortgage broker? A national mortgage lender?
The problem with all of this advice is usually the lender or broker is speaking about Fannie Mae and Freddie Mac home loans. Most consumers have become acutely aware of the troubles Fannie and Freddie are currently experiencing. If you are applying for a Fannie or Freddie home loan, then you are probably going to hear the 10 to 15 percent down comment or the perfect credit scores routine.
The best advice I can give someone looking to buy a home is to consider the source of your information. It would be wise to ask if your lender provides access to the following types of loans:
•VA (Veterans Administration) home loans;
•USDA (United States Department of Agriculture) rural development home loans; and
•FHA (Federal Housing Administration) home loans.
In today’s market, buyers have numerous options to qualify for a home loan with anywhere from 3 percent to zero money down. And, yes, these are programs that are offered here on the Emerald Coast.
First of all, if you are a veteran of military service or an active duty member of our armed forces, you may be eligible for a VA (Veterans Administration) home loan. The VA home loan provides 100 percent financing for homes up to a purchase price of $417,000. In addition, there is no mortgage insurance with a VA loan. A veteran will pay a one-time VA funding fee at the time of closing for the utilization of the product.
In addition, the United States Department of Agriculture (USDA) provides a rural housing home loan.
There are two main criteria to qualify: the property’s location and the borrower’s income.
When I first started doing USDA rural home loans, I was surprised at how many properties actually fell into the guidelines. If you are outside the city limits in most areas, it pays to check it out. The majority of Okaloosa and Walton counties fall into the USDA net and can qualify.
The USDA home loan provides 100 percent financing with no mortgage insurance. Like the VA home loan, there is a one-time funding fee that is charged at closing for the use of the loan. To check and see if the property you are looking to buy qualifies for a USDA home loan, please visit http://eligibility.sc.egov.usda.gov/eligibility
You can also check to see if you meet the income qualifications for the USDA program.
Third, if you don’t qualify for a VA loan or your area is not eligible for a USDA loan, the FHA may be your best bet. 
Currently, a buyer can purchase a home with as little as 3 percent down. On Jan. 1, this will increase to 3.5 percent down. FHA loans provide lower down payments, lower mortgage insurance and most often lower interest rates than Fannie or Freddie loans.
If a lender isn’t discussing your options regarding FHA financing, it would pay to ask why it is not an option. FHA home loans are not credit score driven, so if you have blemishes on your credit, you can still qualify.
In 2007, a lot of lenders were only closing Fannie and Freddie loans and other non-conforming products. When the market shifted, many of these companies had to start the process of getting licensed to originate FHA home loans. This takes time and resources. To find out if a lender is licensed by the FHA, please visit http://www.hud.gov/ll/code/llslcrit.cfm
There are varying levels of licensing, so be sure to do your homework.
In addition, FHA has limits on the size of the loans that can be closed. It differs from county to county across the country. Here in Okaloosa and Walton counties, the limits are $312,500 and $362,790 respectively. 
According to Sarah Stone of RE/MAX Paradise Properties in Destin, there are currently 1,773 single-family residences for sale that fall under the $312,500 loan limit in Okaloosa County. In Walton, there are another 787 properties for sale under the $362,790 limit. 
Keep in mind that these numbers do not include any condos currently for sale on the Emerald Coast. 
One more thing.
An FHA home loan is intended for someone buying a primary residence.  Second homes and investment properties are not eligible for FHA financing.
In closing, in today’s volatile market, it pays to deal with an institution that has access to all mortgage products currently offered in today’s market.
It can mean the difference in getting a lower rate and putting less money down on your home.

Phil Heppding is the Sales Manager at Mortgage Now in Destin.  He can be reached at 877-269-2592 ext. 230 or pheppding@mtgnow.com.